I received the following recent email query:

“I have a situation where my would-be-insured is needing, because the lease states it, fire legal liability $1,000,000 and the policy we have been offered by a carrier states, “Damages To Premises Rented To You” is only $100,000. The offering I received from the carrier is for CGL “CP 00 90.” Could you please shine some light in this?”

“Fire legal liability” is an outdated term that far too many still use, even though the standard liability policies dropped the term in the early 1980s. As that was more than 30 years ago, you would think that whomever drafted the lease would be more up-to-date.

Leases are legal documents creating serious duties, responsibilities, and obligations, not fond recollections of the past.

More egregious, this type of “well, that may not be the latest and greatest terminology, but you know what we meant” preparation of what is supposed to be a legally precise document cannot help but lead us to wonder what other slipshod errors, from minor to potentially disastrous, lie in wait. Beyond the real danger is a simple bit of borderline fraud: Some unsuspecting client likely got billed for this lazy “cut and paste” as if it were real legal expertise.

Do everyone a favor, contract drafters, and follow a simple three-step formula:

Decide exactly what protection you want to gain from the contract.
Determine the current precise correct term for that protection. If no such term exists, revisit Step 1.
Write the contract, using the terms determined in Step 2.

Diving into policy language

Now let's raise clarity for the query. Note: I'm assuming there are two carriers: the first offering a commercial general liabilityand the second referring to the CP 00 90.

The first is on the right track with “Damages To Premises Rented to You” as that is today's Insurance Services Office coverage forms equivalent to the old “Fire Legal.” One potential point of confusion arises when those turning to the actual form — CG 00 01 04 13 — find there is no specific coverage so named in the insuring agreement — it is created by the following exception to the ISO CGL's CG 00 01 04 13 Coverage A exclusions:

“Exclusions c. through n. do not apply to damage by fire to premises while rented to you or temporarily occupied by you with permission of the owner. A separate limit of insurance applies to this coverage as described in Section III – Limits of Insurance.”

It is only in the Declarations and in Section III that we find the coverage created by this exception is subject to a specific separate limit titled “Damage to Premises Rented to You.”

If we assume that the lease drafter got the name wrong but the coverage right, this means the landlord, reasonably or not, wants a $1 million limit for “Damage to Premises Rented to You.” So for the tenant to fully comply, the first carrier either needs to raise that $100,000 limit to the $1 million or provide a combination of underlying commercial general liability with an additional amount in an excess/umbrella policy that totals the full requirement.

As to the second carrier, the reference to CGL “CP 00 90” is confusing at best. My take is that intertwining liability with commercial property in addressing a demand for “fire legal” refers to providing any coverage limit required beyond what they are willing to include in the CGL via the commercial property program rather than an excess/umbrella policy.

Special Reports /

Outdated terminology: What to do when a policy calls for 'fire legal liability'

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